STRATEGIC MANAGEMENT 2. STRATEGIC OBJECTIVES " What do you want to achieve or avoid?" The answer to this question are the goals. How will you achieve the desired results? "The answer to this can be called the strategy." - William E. Rothschild Before moving on to the theme of the strategic objectives, what we have learned in the previous module will be briefly reviewed, where the focus of our attention will be on the concept of strategy. As we have seen, strategy indicates a set of actions that should be performed in order to achieve the goal set by the company. What is necessary for accomplishing the objective is to use the firm’s resources and capabilities, while adapting to the environment and always taking into account the mission of the company. Page 43 Page 43 STRATEGIC MANAGEMENT 2.1. WHAT ARE STRATEGIC OBJECTIVES? Strategic objectives are understood as those that validate the vision and mission that the company adopted from the starting point. Those are the objectives and goals developed at a strategic level that an organisation aims to attain in the long-term. Some positions identify the strategic objectives also as general objectives. These are based on the mission, vision, and values of the organisation that determine the actions that will be carried out. The purpose of the strategic objectives is to provide guidelines for boosting the activity and performance of an organisation. They are usually considered a step prior to drawing up the secondary objectives. They determine the line of action, i.e., strategy and the means that will be needed to accomplish the mission, respecting the established vision. In the business world, the strategic objectives are related to general purposes that a business organisation establishes. They form part of a work plan and are usually developed during the planning or the strategic planning. Each department of a company also tends to develop its own strategic objectives, always taking into consideration the general objectives. The strategic objectives concentrate the main achievements that the company needs to fulfil to make its vision a reality. So, the fulfilment of the objectives will be based on strategies, activities, indicators, goals and, managers, which need to be perfectly aligned in order to obtain the highest efficiency and effectiveness. Page 44 Page 44 STRATEGIC MANAGEMENT MISSION VISION STRATEGIC GOALS VALUES ü Strategies: the path to follow in order to achieve the objectives. ü Activities: which will be run to carry out the strategies. ü Indicators: standards measures to evaluate activities. ü Goals: numerical results that are expected to achieve. ü Responsible: area(s) that will meet the expected results. 2.1.1. Characteristics of strategic objectives 1. Clarity: goals should be clearly defined so that they will not raise any doubt and be clear to everyone who participates in their achievement. 2. Flexibility: objectives should be flexible enough to be modified when the circumstances require it. In other words, they need to be flexible so that they make the most of the conditions of the environment. 3. Measurable: targets should be measurable in a time frame to determine their achievement with precision and objectivity. 4. Realistic: objectives should be within a company’s reach. 5. Coherent: targets need to be defined in such a way that they serve the company. Objectives by functional areas should be coherent with each other, i.e., they should not contradict themselves. 6. Motivating: goals should be defined in such a way that they constitute a motivating element, i.e., they must be perceived as a challenge by the people responsible for their fulfilment. Page 45 Page 45 STRATEGIC MANAGEMENT ✓ The members of the organisation need to be confident that they can achieve the objectives. ✓ Goals have to be developed with the participation of the company’s staff. 2.1.2. Types of strategic objectives It is very important that strategic objectives comply with the SMART technique, which determines that the objectives should be: - Specific - Measurable - Attainable - Realistic - Time-bound Now let us take a careful look at the characteristics that make up the SMART technique. Specific Objectives should be as specific and detailed as possible so that they not misleading. To ensure that the objectives are specific, we have to answer the following questions: - What do we want to accomplish exactly? And why? - Who is involved? - In which field are we going to work to achieve what we want? - In what time frame do we want and have to achieve it? - What strengths and weaknesses do we have? - What threats and opportunities can we come across externally? - What benefits will it bring us? Measurable It is very important that the goals we set can be measured. Thus, if we are devoted to sales we should not simply want to boost sales, but we should set the specific percentage by which we want to increase it, so that, by analysing the results, we can Page 46 Page 46 STRATEGIC MANAGEMENT measure what we have achieved and what is left. Thus, if our objective is to increase sales by 10% over the next 6 months, it will be easier for us to measure the achievement of this objective than if we simply set ourselves to increase sales since we will not be able to compare what has been achieved with the established objective. Attainable As we have already seen, it is important that the objectives that we propose are achievable. Of course, we need to be ambitious and never settle for less, but we should always be realistic about the goal we set. Regarding this aspect, we need to highlight the motivation of workers. In this case, if an enterprise establishes a target which is beyond their reach, it risks discouraging its workers as they see that it is impossible to achieve the goal, while if it sets goals that are achievable, employees will feel motivated seeing that, step by step, the set objective is being reached. Realistic As we have already mentioned, objectives should be realistic, so they must be in line with the values of the company and its vision. In addition, it needs to be achievable with the use of the tools already available in the company. Time-bound Finally, it is important to establish these objectives according to a specific time, i.e., we should set a time frame in which the goal should be achieved. Three types of objectives can be distinguished: long, medium and short-term. Let us now focus on each of them. ▪ Long-term Long-term objectives, also called strategic objectives, are the results that an organisation seeks over a multiyear period. They are based on the specifications of the objectives; they are remarkably more speculative for the distant years than the Page 47 Page 47 STRATEGIC MANAGEMENT immediate future. These objectives are established in a maximum period of 5 years and a minimum of three years. The strategic objectives serve to define the future of the business. Some examples of these goals are: ✓ Consolidation of the assets. ✓ Improvement of the technology. ✓ Sustained growth. ✓ Reduction of the default portfolio. ✓ Integration with partners and society. ✓ Training and improvement of the staff. ✓ Clear concepts of what the areas are that make up the company. ✓ An integral solution towards the path to excellence. ✓ Easily accessible purchase of the product. ▪ Middle-term They are the tactical objectives of the company and are based on the general objective of the organisation. Middle-term goals are also known as departmental objectives since they are the formal objectives of the company and are set by areas to help the company achieve its purpose. Their application tends to take between one and three years. ▪ Short-term They are the objectives that will be carried out in less than a year, the so-called individual objectives or operational objectives of the company, as they are the goals that every employee wants to reach within the company. Short-term goals look at characteristics of the company in the present and develop strategies for improving them. Thus, in order for them to set the stage for the achievement of the middle and long-term objectives, it is necessary to establish a plan to meet each objective and to combine them within a master plan that needs to be reviewed in terms of logic, consistency, and practicality. Their fulfilment should take less than a year. Page 48 Page 48 STRATEGIC MANAGEMENT It would come in handy now to see briefly what we mean when we talk about strategic objectives of human resources. ▪ Strategic goals of human resources The strategic objectives of the Human Resources Department of the company focus on issues specific to its scope but in line with the strategic objectives of the company. In general, they are based on issues of economic and social efficiency, and integration. They are formulated after an analysis and study of different strategic options and are usually incorporated into the strategic plan of this department. These objectives offer a reference system in order to guide the different actions and functions that are carried out in the management of the personnel of a company. Here are some examples of strategic objectives of some well-known companies: A. Example 1: Objective: To increase sales in a month after the September 2008 crash. Strategy: Keeping on the shelves only those items with a high turnover, leaving out many products from external brands, as a result, giving more space to the company’s own brand. Action plan: - Reduction of items. Between 600 and 800 items will be left out according to its rotation. - Removal of several duplications; for example, in the case of biscuits or soft cheese, since sometimes the same product is presented in two different formats. - Changes in packaging and formats. More economical packages will be used such as the cartons of milk without gloss and larger formats to encourage savings. - Fruit being sold again in bulk, something that was not acceptable in the past. Page 49 Page 49 STRATEGIC MANAGEMENT - Lowering prices due to the fall in the raw materials. The price of bread has already decreased by an average of 13%. Example 2: Objective: To increase the number of sales in a year with an aim of being the most commonly used leading airline. Strategy: Getting the lowest airfares in the market. Action plan: - Second line airports. - Offering many daily frequencies per plane. - Elimination of the business class. - Elimination of services on board such as food and press. - Closing unprofitable routes. - Online sales. - Working with aeroplanes without blinds in the windows, with non-reclining seats and without a rear bag, which reduces the price per plane and the costs of repair and maintenance. 2.2. STRATEGIC INDICATORS In order to establish strategic objectives that are coherent with the mission of the company, the establishment of a series of indicators that help us to know and measure reality is essential. It is a subset of context indicators, linked to the priorities defined for structural interventions and cohesion, individualized to each operational programme. They are used to measure the evolution of the context in respect of the goals set by the programme of the company. Page 50 Page 50 STRATEGIC MANAGEMENT The strategic indicators are a selection of programme indicators that are used to measure the evolution of the environment regarding the goals established in the programmes. In this sense, they provide quantified information on the socio-economic situation, with reference values and official sources, and reflect the objective value that is to be achieved in the programme. Therefore, each operational programme has its own strategic indicators based on its priorities and the expected financial efforts. In short, the function of the strategic indicators is to analyse the degree of achievement of the strategic objectives of each operational programme in the different specific areas. The success of the analysis lies in knowing how to identify and interpret the main indicators related to the business, its historical evolution and its trends for the future. An omission or an estimation error can have negative consequences for the business, both in the short, medium and long-term. Being able to foresee its impact will allow identifying the main actions and strategies that help the business to grow (if one sells natural products in respect of the global trend of health care), avoid their failure (considering the impact of electromagnetic waves on the health of people), speed up the decision to exit the market (the increase of restrictive rules regarding the sale and consumption of products with carcinogenic potential). 2.2.1. Types of indicators There are two types of indicators: A. Process indicators They are specific actions that the company should undertake to achieve its goals. They allow us to: - Know the causes of deviations. - Focus on corrective measures. B. Result indicators They are the exact expression of what has been achieved. Use of indicators: Page 51 Page 51 STRATEGIC MANAGEMENT - Pilot/control tool. - Learning tool. - Communication tool. In order to understand better the methodology of the relationship between objective and indicator, we will take a look at two examples: Example 1: OBJECTIVE: Obtain staff satisfation to reach a higher value. PROCESS INDICATORS: Number of improvement proposals provided by workers. Increase percentage in the number of hours of training in each employee. - OUTCOME INDICATOR: Average rating obtained in the personal satisfaction survey. - Example 2: OBJECTIVE: To obtain the ISO 9001-2008 certification in June 2015. PROCESS INDICATORS: - Percentage of designed services that meet the specifications of quality of ISO 9001 - 2008 . Percentage of services that meet the specifications of the standard ISO 9001-2008. OUTCOME INDICATOR: - Quality certificate ISO 9001-2010. Page 52 Page 52
